We obtain exact semi-explicit solutions to the optimal pricing problem for the multinomial logit (MNL) consumer choice model with network effects, through a novel conditioning argument and the use of the Lambert W function. Then we manage to characterize the exact optimal solution in the...

In this paper, we propose a general continuous-time stochastic-modeling framework where a financial firm offers incentive bonuses to a team of employees, who would thus exert effort to reduce operational risk losses. We characterize employees' Nash equilibrium efforts and the firm's optimal...

This paper models the incentive misalignment between firm owners and their employees as a barrier to technology diffusion, which is a critical yet understudied feature, in technology adoption settings. To do so, we consider a general continuous-time optimal stopping framework with the...

Efficient inventory management in the face of product variety is an important part of retail operations management. In this paper, we analyze the optimal stocking policy for a retailer, in a setup with a single horizontally differentiated product with an arbitrary number of product variants,...

One popular approach to model the limit order books dynamics of the best bid and ask at level-1 is to use the reduced-form diffusion approximations. It is well known that the biggest contributing factor to the price movement is the imbalance of the best bid and ask. We investigate the data of...

Motivated by optimal trade execution, this paper studies the temporal evolution of the shape of a limit order book over a time horizon that is large compared with the length of time between order book events, with the aim of approximating the transient distribution of the shape. Relying on the...

Hidden orders are offered by many lit trading venues for participants to hide the true size of their orders. To help a risk-neutral trader executing a target volume to minimize the execution cost by benefitting from the setting of a limit order market allowing hidden orders, we propose a...

Motivated by optimal trade execution, this paper studies the temporal evolution of the shape of a limit order book over a time horizon that is large compared with the length of time between order book events, with the aim of approximating the transient distribution of the shape. Relying on the...

We develop a data-driven approach for options market making. Using stock options data from CBOE, we find that both buy and sell orders exhibit strong self-excitation but insignificant cross-excitation. We show that a Hawkes process with a time-varying baseline intensity and the power law kernel...

We propose an actor-critic reinforcement learning (RL) algorithm for the optimal execution problem. We consider the celebrated Almgren-Chriss model in continuous time and formulate a relaxed stochastic control problem for execution under an entropy regularized mean-quadratic variation objective....